I just noticed that so many are people are asking “How do I start with real estate investing?”. I was just about to answer one of the comments when I realized my reply was already good enough to be an article. It already had more than 700 words in it! Anyway, I believe the timing for answering this frequently asked question is perfect as we start with a brand new 2012!

For those who asked the same question, here goes…

7 tips to help you get you started with real estate investing

1. Begin with the end in mind. Answer the following questions:

• What do you want to achieve with real estate investing?
• Is it financial freedom?
• How do you define YOUR financial freedom?
• What is it in in terms of money (ex. passive income)?
• Is it about time freedom?
• Is it about having the freedom for you to pursue your real purpose in life?
• Is it about all of the above?

I believe the answers to the questions above can lead to what people call a “Vision”. Actually this is probably the hardest part of the process of getting started, and yet without this, one might end up running around in circles for 48 years. Okay, I’m exaggerating.

Seriously though, this is the first thing you should do, but it can get complicated. For now, I suggest you start forming your “Vision” in your mind and let’s get back to this in another post.

2. Learn as much as you can about real estate transactions in the Philippines. If you are going to invest in real estate, you will certainly enter into real estate transactions, so you need to familiarize yourself with the “ins and outs” of these transactions.

If you want to focus on investing in foreclosed properties, you can try attending a real estate auction as an observer and learn as much as you can, before actually buying any foreclosed property. Don’t be afraid to ask questions, especially when the bank officer says you should have already done your due diligence!

Whether foreclosed or not, you also need to become familiar with the legal aspects of property ownership, real estate taxation, real estate laws in the Philippines, etc. If these sound like what you would find when attending a seminar or review as part of the requirements to become a licensed real estate broker, give yourself a pat on the back because that is my next tip…

3. Attend a seminar/review for aspiring licensed real estate brokers – Do this  not really for the purpose of become a licensed realtor, but more for the knowledge. Of course, it wouldn’t hurt if you did take the real estate brokers exam and passed!

4. Find your niche. You need to become an “expert” in one area, preferably an area that is near where you live, or where you work, any place that is near you. When I say near, it should be no more than 30 minutes to an hour away. Anything farther might lead to wasting your precious time, money, and effort.

No, you cannot just say you want to invest in Metro Manila. You need to find something smaller, like a village, a barangay, a municipality, or whatever area suits you. You need to be an “expert” so that when an opportunity knocks, you will know if it really is a good deal or not. I believe it is hard to get into this level if you focus on an area that is too big, like the whole of Metro Manila for example.

Don’t believe me? Go ahead, try to focus on the whole of Metro Manila and analyze every “promising” deal that comes your way, and see how fast this will burn you out.

5. “Pay yourself first.” I believe the best way to raise capital is to raise your financial literacy so that you can manage your money and start saving for your investment. Don’t think about those “nothing down” real estate deals. If your problem is the lack of money, maybe your problem is the way you handle money.

Going into real estate investing won’t solve the problem of mismanagement of personal finances, whether you have a lot of money or not. You should solve this problem BEFORE you start investing in real estate. The simplest way to start is to pay yourself first. If you have read Robert Kiyosaki‘s “Rich Dad Poor Dad”, or David Bach‘s “The Automatic Millionaire“, or T. Harv Eker’s “Secrets of the Millionaire Mind”, or even George S. Clason’s “The Richest Man in Babylon“, you would know the wisdom of paying yourself first.

6. Let people know you are now a real estate investor. Announce to all of your facebook friends that you now invest in real estate. Send a text message to all the people in your phonebook, and/or send an email to everyone in your contacts list. Just remember that spamming is bad! Don’t forget to get some calling cards, tell people that you meet how they can contact you through this valuable “leave behind” that they can keep and retrieve when the need arises.

7. Join or start your own real estate investors club. Preferably, join a group with people from the same same area within your niche. It can be a formal real estate club, or just a network of friends that are also involved in real estate investing who meet regularly (how often is up to you, but don’t over do it!).

It would be great if your club or network includes real estate brokers, lawyers, accountants, etc, those who can help you with how things work, specifically in your niche. Aside from making new friends, you may also find mentors and business partners. Just be careful and keep an eye out for people who are out to make a quick buck at your expense…

~~~

Please bear in mind that I wrote this much like I was answering a comment, so this list only includes 7 tips that came to mind and there are definitely more! I’ll most probably have a part 2 for this in the near future.

Any more tips to get started?

Are there any other real estate investors out there who are willing to share? If you have already bought an investment property, I’m sure others who want to get started would also like to hear from you! Please share more tips through the comments below. Thanks!

Happy Real Estate Investing in 2012!

~~~

To our success and financial freedom!

Jay Castillo

Real Estate Investor
PRC Real Estate Broker License No. 3194
Blog: http://www.foreclosurephilippines.com
Follow me in Twitter: http://twitter.com/jay_castillo
Find us in Facebook: Foreclosure Investing Philippines Facebook Page

Text by Jay Castillo and Cherry Castillo. Copyright © 2011 All rights reserved.

Full disclosure: Nothing to disclose.

Photo credit: pobre.ch, on Flickr

7 tips to help you get you started with real estate investing is a post from: Foreclosure Investing Philippines

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What is a mentor? A mentor is someone who teaches or gives help and advice to a less experienced and often younger person.[1] Having a mentor is very important when you are serious about real estate investing, or about learning any topic. You have to be careful though, and make sure that you get advice from a real mentor.

My husband and I know the value of a good mentor.  We attend seminars conducted by experts who are well-respected in the real estate field and related fields in order to “sharpen our saws” since we are really serious in our real education. We also read a lot of books on real estate which we get from Booksale, Fully Booked, Powerbooks, and of course National Bookstore. This way, we are also being mentored, in a way, by experts from other countries. We even have our own Cashflow 101 and Cashflow for Kids boardgames, and almost all of the Rich Dad books! Yes, we are very nerdy! (Anybody else here who gets a high whenever they learn something new?).

My point is, investing in your education is investing in yourself, and nobody can take that away from you.  It is up to you to apply what you have learned in real life.

A REAL real estate mentor

Our real estate mentor is Engr. Enrico Cruz.  For those who don’t know, Engr. Cruz is a respected real estate educator with over 35 years of working experience in the Philippines, in the field of engineering, construction, real estate, and education.

He was the topnotcher of the 1994 Real Estate Appraiser Examination, and 8^th placer in the 1988 Real Estate Broker’s Examination. He is also one of the few licensed Real Estate Consultants and Real Estate Fellows in the Philippines.  He is also the President and CEO of Urban Institute of Real Estate and Construction, a respected provider of real estate education in the Philippines.

Real Estate Investing Lecture Series

Knowing how important mentoring is to the beginning real estate investor, we are glad to inform you that Engr. Enrico Cruz will be conducting an 8-day Real Estate Investing Lecture Series on October 3, 5, 10, 11, 17, 19, 24, 26, 2011 from 1:30 to 6:00 pm.  The topics are as follows:

Each session is stand-alone, and you may choose which topics you want to attend. The learning investment for each session is only P1,500.00 (basically only P375/hour). I remember that motivational speaker T. Harv Eker suggests that a person set aside 10% of his income for education, as part of his plan for financial freedom, and for me this fits the bill.

5 reasons to attend the lecture series

1. You get to interact with a real, live speaker and you can ask him questions!  Sometimes, if the speaker can answer even only one question which has a direct relation to your source of income, the P1,500.00 learning investment is already worth it!
2. You have handouts which you can study over and over again.
3. You get to have Engr. Cruz as your mentor (to me, this is priceless).
4. You get to network with new, like-minded friends! You can give away your calling cards! I have met a lot of connections through Urban Institute lectures, which opened doors to business opportunities.

And, last but definitely not least:

5. ALL PROCEEDS WILL GO TO THE HOSPICIO DE SAN JOSE ORPHANAGE!

Isn’t it fantastic? You get to learn about real estate and give at the same time! It’s up to you if you would like to treat the seminar fee as a tithe. I’ll tell you this, if you want to succeed in anything you do, give to God what is His and He will not be outdone!  In Malachi 3:10, the Bible says:

“Bring the whole tithe into the storehouse, that there may be food in my house. Test me in this,” says the LORD Almighty, “and see if I will not throw open the floodgates of heaven and pour out so much blessing that you will not have room enough for it.”

The above passage is absolutely true. Incidentally, if you would like to get “mindsetting seminars” for free, we recommend that you attend the Feast led by the Light of Jesus and Bo Sanchez.  The schedules are in the right side of this page: http://kerygmafamily.com

To learn about the details of the topics, discounts for groups of 3, discounts for those attending 4 days or more, freebies for those who will register on or before September 20, 2011 (Tuesday next, next week), among others, click on the thumbnail below.

Urban Institute Real Estate Investing Lecture Series

Seminar fees will be treated as donations to the Hospicio de San Jose, who will issue the Official Receipt to recognize the donation. You will notice that the seminar fees shall be deposited directly to the account of the Hospicio de San Jose, and you can even register directly with the Hospicio.

After the lecture series, Engr. Cruz plans to bring the students to the Hospicio so they can see for themselves the orphans there. It’s good to put real estate investing in the proper perspective – it’s not just about making money! For more information, please visit: http://www.urban-institute.com

Let’s share our blessings while learning about real estate investing!

~~~

To our success and financial freedom!

Cherry Vi M. Saldua-Castillo

Real Estate Broker, Lawyer, and CPA
PRC Real Estate Broker License No. 3187
PRC CPA License No. 0102054
Roll of Attorneys No. 55239
Websites:

• http://www.smgreenresidences.com
• http://www.smblueresidences.com

Text by Jay Castillo and Cherry Castillo. Copyright © 2011 All rights reserved.

Full disclosure: Nothing to disclose.

Are you looking for a REAL real estate mentor? is a post from: Foreclosure Investing Philippines

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John Calub’s “How to become a Money Magnet Comprehensive Seminar” has been highly recommended by my good friend Bryan Uy, the man behind InvestingPinoy.blogspot.com, which is why I am also inviting all of you out there to grab this opportunity to attend.

Bryan attended the same seminar last June 19, 2010 and was all praises for it. One thing he mentioned about this seminar is it can really help raise one’s “Wealth Thermostat”. If you are one of those who find it hard to believe that you are capable of becoming wealthy, then your “Wealth Thermostat” might be set to “low”. This seminar aims to change that.

More details about the seminar and how to register can be seen in the e-mail invitation below.

———- Forwarded message ———-
From: John Calub <johncalubtraining@gmail.com>
Date: Thu, Jul 8, 2010 at 2:12 PM
Subject: LAST FEW SEATS! July 10 at the SMX Convention Center

You, your family and friends are invited to attend:
How to Become a Money Magnet Comprehensive Seminar
WHAT YOU’LL DISCOVER:

• The ultimate secret to wealth creation
• How to have a multi-millionaire mindset
• How to manage and grow your money

DATE: July 10, 2010 (Saturday)

TIME: 8 AM TO 6 PM

VENUE: SMX Convention Center, MALL OF ASIA  

TICKET PRICE: was P8,000 now FREE
Only P250.00* only to cover workshop materials and processing. Payments accepted via GCASH, BPI 24/7 Banking, BDO or via TicketNet.

*Inclusive of workbook, pen and certificate of completion
*Meals not included

TO REGISTER: 1. Call 748-7646 / 382-9997 / 744-2925 (Look for Charm or Belle) 2. Text 0905-2245908 If our lines our busy, call again.
Download the Registration Form here.

http://www.moneymagnetseminar.com

Forward this to your loved ones, family and friends or anyone you think may benefit from this program.

I’ve seen John give seminars and I can’t help but say he reminds me of T. Harv Eker, not that I have already attended any of Harv’s seminars, I was once able to listen to an audio recording of Harv’s “Millionaire Mind Intensive Program“.

John’s seminar promises to be a great way to “Sharpen the saw”, which is something we all need right?!

My wife and I have already registered, along with most of my teammates from the RYP team. As I write this post, about 20 slots are still available. If you want to attend, better act fast and register now, before the last few remaining seats are gone!

I hope to see you there!

To our success and financial freedom!

Jay Castillo

Real Estate Investor
Real Estate Broker License #: 20056
Blog: http://www.foreclosurephilippines.com
Follow me in Twitter:http://twitter.com/jay_castillo
Find us in Facebook:Foreclosure Philippines facebook page

Text by Jay Castillo and Cherry Castillo. Copyright © 2010 All rights reserved.

PS. Are you a new visitor? Click here NOW to start learning more about foreclosure investing in the Philippines

PPS. Don’t be the last to know, subscribe to e-mail alerts and get notified of new listings of bank foreclosed properties, public auction schedules, and real estate investing tips. Inbox getting full? Subscribe through my RSS Feed instead!

How to become a Money Magnet is a post from: Foreclosure Investing Philippines

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We say goodbye to 2009 and give thanks for a very memorable year. In 2009, we marked the first year anniversary of Foreclosure Philippines, although I never got around to creating my first anniversary post. Actually, October 31, 2009 was the day of our first anniversary. Nevertheless, I just want to mark that day as we bid farewell to 2009 and I would like to take this opportunity to look back at 2009 for one last time.

Looking back at 2009

The last sunset for 2009

My target for 2009 was to get out of the rat race with the help of acquiring at least 4 income generating properties. Thanks, or rather no thanks to Typhoon Ondoy, I was only able to get 3. Not bad! I still consider buying 3 foreclosed properties in a year to be an accomplishment. Now I just need to get a tenant or a buyer for my 2 remaining vacant properties. All I need is to focus and dedicate more time to marketing them. Wish me luck!

By the way, thanks to the 3 month moratorium for amortization payments given to Pag-IBIG borrowers affected by Typhoon Ondoy, I am technically out of the rat race while the moratorium is in place. I guess now you have an idea how much more passive income I need to get out of the rat race permanently in 2010.

I also remember at least 3 visitors/readers who have actually bought their first investment properties. Each time I learn about new investors buying their first properties, I can’t help but feel a sense of satisfaction and accomplishment!

Of course I have a lot of plans for the coming new year. I have a lot of things to improve on, lots of changes that need to be done, and also a lot of challenges to face and address. I guess I’ll just share more about these in my next post that welcomes 2010…

For now, let’s just focus on 2009. It really was a very memorable year to say the least and I would like to thank all of you who have been with us through it all.

Thank you to my mentors in real estate investing, financial literacy, etc…
I would like to thank my mentors and fellow real estate investors who have been a big help for me in 2009, most of whom I have had the honor of meeting in person, others I have met online, and a few through their books. These include Robert Kiyosaki, Bo Sanchez, Larry Gamboa, Trace Trajano, T. Harv Eker, Tim Ferris, Thea Santos, Ronald and Weng Cagape, Eden April Alemania, Jessie and Apple Raquel, Engineer Enrico Cruz, Kuskos Balungos, CondoInvestor, Gleceper, Jon Abaquin, Dodie Felix, John Calub, fellow TRP Club Marikina Members, Earth, fellow brokers from REBAP MRCI and REBAP National, fellow forum members of PinoyMoneyTalk.com, my broker, my contractor, and all fellow investors who I have met during auctions.

…our sources of income generating properties…
Of course I would also like to thank all banks in the Philippines, SPAV’s, Government Financial Institutions(GFI’s), auction specialists like Property Forum and CBRE, private lending institutions, and cities and municipalities who have made available their various listings of foreclosures, foreclosed properties or acquired assets, and repossessed cars.

…and also to my mentors and fellow bloggers from the blogosphere…
I would like to thank Jomar Hilario, Anton Diaz, Joel Christopher, Ian Del Carmen, Tyrone, Dinah, James, Melo, Fitz, Roel, Sel, Marhgil, Jan, Snow, Manuel, fellow attendees of Anton’s Maven Secrets Program, fellow attendees (and members of the online version) of Jomar’s Internet Marketing Workshop, and a whole lot more. All of you guys have helped me in one way or another, sometimes without you even knowing it.

It goes without saying…
And I also thank my loving wife and my son CJ who really are the main reasons why I want to become financially free, all family members and friends who have been patient and supportive as I continue on this journey to financial freedom and to our Almighty God who has made all of this possible.

… and last but not the least, a big thank you also goes out to…
All of the readers and subscribers who have been with us through thick and thin in 2009. Thank you to all of you who are in the same quest as I am. Thank you for all the words of encouragement, questions, comments, and concerns raised that I have received through the comments section, e-mails, text, and also from those who I have had the pleasure of meeting like Mike, Dan, Paula, and Roel who I have met recently. I thank each and everyone of you!

A Prayer that helped me all throughout 2009
As 2009 ends, let me share with all of you one prayer that has not only helped me survive 2009, but also thrive in spite of all the challenges that have come my way.

The Serenity Prayer

God grant me the serenity
to accept the things I cannot change,
the courage to change the things I can,
and the wisdom to know the difference.

With that, I say goodbye and thank you to 2009 and wish everyone only the best for 2010!

Happy New Year and Happy Investing!!!

To our financial freedom!

Jay Castillo
Real Estate Investor
Real Estate Broker License #: 20056
Blog: http://www.foreclosurephilippines.com
Click here to contact me via E-mail
Mobile phone (Call/SMS): +639178843882
Follow me in twitter:http://twitter.com/jay_castillo
Become a Fan in Facebook:Foreclosure Philippines fan page

Text by Jay Castillo. Copyright © 2009 All rights reserved.

PS. If you are a new visitor, please start here to learn more about foreclosure investing in the Philippines.

PPS. If you feel that anyone else you know might benefit from this post, please do share this to them and don’t forget to subscribe to e-mail alerts and get notified of new listings of bank foreclosed properties, public auction schedules, and real estate investing tips. If your inbox is getting full, you may subscribe through my RSS Feed instead.

Thank you and farewell to 2009! Happy New Year to all!!! is a post from: Foreclosure Investing Philippines

I first played Rich Dad’s Cashflow 101 game way back in 2007, after I found Think Rich Pinoy Seminar attendees who organized their own cashflow 101 game sessions.

I was hooked ever since. I play cashflow 101 whenever I get a chance to do so as part of “sharpening the saw”.

I believe that the cashflow 101 game effectively simulates one’s  journey out of the rat race and I would like to share here what I have learned from playing what I consider to be a “life changing game” and its practical applications in real life.

Here goes my Top 7 lessons learned from playing Rich Dad‘s cashflow 101 game…

A photo of the cashflow 101 board game courtesy of Earth del Mundo

1. Simplify and get out of the rat race faster

I noticed that whenever I played the cashflow 101 game and was able to choose a “simple” profession like a truck driver for example, I was able to get out of the rat race faster. This happened during the Think Rich Pinoy Seminar I attended last August 2007. As a truck driver, although my salary was low, my monthly expenses were also very low.

Because I had  low monthly expenses, I already had a positive cashflow and all I needed to do was just get those passive income generating deals. After each payday, I had more money to invest, and with just a few passive income generating deals, I had enough passive income that exceeded my monthly expenses, and I was able to get out of the rat race faster.

In real life, I am applying the same strategy by reducing my monthly expenses by leading a simple life. This was also described by Bo Sanchez in his book “Simplify and Live the Good Life” and T. Harv Eker in his book “Secrets of the Millionaire Mind“. My family and I lead simple lives, which explains my very low target monthly passive income which is why I know I am going to get out of the rat race in real life very soon!

2. Start with small deals first, and the big deals will follow

In the beginning of the game, I always chose small deals even if they produced little cashflow. Later on, when the market presents good opportunities, I was able to sell or “flip” these small deals and then I used the profit to buy the bigger deals that produced greater cashflow, allowing me to get out of the rat race.

My four “green houses” which I’ll exchange for a “red hotel” during a recent game I played with Earth. I was not able to get out of the rat race during this game but we only played for an hour due to time constraints.

In real life, I am also following the same path. I focus on single family homes or properties which may produce little cashflow at  the very least, but can actually generate significant profits if “flipped” or sold through “rent-to-own”. I can then use the profit later when they are enough to get bigger deals that can produce bigger positive cashflow.

3. Over-leverage often leads to bankruptcy

During the game, we often encounter great deals that produce a lot of positive cashflow but require a big downpayment and it is tempting to borrow money from the bank just to be able to buy those great deals. However, there is such a thing as becoming over-leveraged which can produce negative cashflow situations because of the high monthly payments for those loans.

Even if one’s passive income is enough to cover the monthly payments for those loans, imagine if something happened and the monthly income of one’s investment properties were affected, suddenly the monthly payments for the loans cause a negative cashflow and can lead to bankruptcy. The same can also happen when one is downsized. This is the reason why one should avoid deals that lead to too much exposure or over-leverage.

Applying this is real life is a no brainer. I would not dare buy those multi-unit apartments unless they were in the same price range as the single family homes I focus on. As mentioned in lesson number 2 above, I can go for those bigger deals later when profits from my small deals are enough.

4. It is better to wait for a good opportunity than settle for those not so good deals

In the game, good opportunities come in the form of deals that have big ROI potential, and can be bought with little or no downpayment, while producing positive cashflow. If any of these elements are missing, I consider a deal as “not so good” and I pass them up and just wait for the good deals.

In real life, I do the same and patiently wait for good opportunities. If a not so good deal comes my way, I can either look for ways to make it into a good deal, or I just pass it up and wait for another more worthwhile deal to pursue.

5. Learn how to spot a good deal and grab it

One of the biggest challenges one faces in the game is how to spot those good deals so that you can grab them. Sometimes a good deal is right under your nose and it slips away because you didn’t realize soon enough that it was a good deal.

I believe spotting good deals is a skill and you can only learn this skill by continuously analyzing deals. Once you get the hang of it, you will start seeing those good deals more often. Normally those deals would have slipped away without you knowing it. If you see good deals often, it’s just logical that you will eventually grab one of those deals right?!

6. Learn how to protect your investments

I distinctly remember games where apartment buildings getting toppled by mud and all the cashflow generated by these properties are gone, unless I am covered by insurance.

Does Ondoy and Pepeng ring a bell? Who would have thought that a game like cashflow 101 actually teaches us to protect our investments from such disasters and calamities. Better get your investments insured with “Acts of God nature” coverage pronto!

7. Net worth is worth less, cashflow is king

Once you play cashflow 101, you will notice its emphasis on the importance of cashflow over one’s net worth. You will see that it really is more important to have positive cashflow from passive income. What is the use of having a big net worth if you don’t have any positive cashflow?

In real life, we should apply this by focusing on building our positive cashflow with income generating assets. Even if we have to use leverage to buy these assets, it really is okay. We call this good debt. Don’t be afraid to have good debts that buy real assets that produce the cashflow we need to get out of the rat race for real!

Get out of the rat race in the game, and in real life!

So you got out of the rat race when you played cashflow 101. So what?! That’s useless if you don’t take action and apply the lessons you have learned from the game in real life. But playing a game is one thing, doing it in real life is an entirely different thing… or is it?

I can truly say that Robert Kiyosaki‘s Cashflow 101 game is a “life changing” game because my life has really changed ever since I decided to apply in real life the lessons I have learned from it. Take note that I only listed the top 7 lessons I have learned and I can assure all of you that there are more lessons one can learn from this game.

People may find it hard to believe that one can learn so much from a game and can have such a huge impact in life. I guess you just have to play the game and experience it for yourselves.

How about you, have you played Rich Dad’s cashflow 101 game? What did you learn? Are you applying them in real life?

—

My vision – financial freedom for all!

Jay Castillo
Real Estate Investor
Real Estate Broker License #: 20056
Blog: http://www.foreclosurephilippines.com
Twitter: http://twitter.com/jay_castillo
Facebook: Foreclosure Philippines fan page

Text by Jay Castillo. Copyright © 2009 All rights reserved.

PS. If you are a new visitor, please start here to learn more about foreclosure investing in the Philippines.

Top 7 lessons I learned from playing Rich Dad's Cashflow 101 game is a post from: Foreclosure Investing Philippines

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Update dated June 2, 2011 – After much thought, I have decided to leave Trace Trajano‘s local coaching program and my role as one of the local coaches. I would also like to inform everyone that I am not part of Trace’s other programs.

For those who don’t know, I was once a student of Trace, and I was also part of the team that won his first apprentice challenge, although I decided to leave the RYP team last September 2010. I became one of the local coaches as part of the now defunct Terrific Trio University. I also helped promote his seminars in the past including TRQ 1.0, TRQ 2.0, TRQ Cebu, his quick cash seminars, and the last one was TRQ 3.0.

It has also come to my attention that some materials that Trace used in marketing some of his seminars might make it appear that I am one of his partners. I would like to make it clear that I am not a business partner of Trace Trajano.

Things did not turn out as planned, but lessons have been learned, and I feel it is time for me to move on. ~ end of update ~

One of my mentors, Trace Trajano, recently posted a story about Anna, who bought a property in a foreclosure auction in the US. Take note that some of the things in the story might not be applicable here in the Philippines. Nevertheless, there are lessons here that are applicable to real estate investors  no matter where our locations may be. Before that, here’s the story of Anna…

The Story of Anna
Posted by Trace Trajano on October 15, 2009 at 8:31am

Let me tell you the story of Anna…

Anna excitedly attended a foreclosure auction because she read a book saying that you can get a good deal at auctions.

She bid at the auction and won – wow. “Now I am going to be rich”, she told herself.

She needed 10% down – so she withdrew her life savings and use that as downpayment. Her credit is very good so she was able to qualify for a loan. She pulled it off.

Now it’s time to rent out the property.

BUT, there is a problem. In FORECLOSURE auction, there is very limited time to inspect the property. In fact, she bought it because the outside looks good and she figured the inside should be in good condition also.

There is termite damage at the joints and it’s an additional $5,000 repairs that she couldn’t afford. She pulled out her credit card and got a cash advance – payable with 24% interest. She figured she can rent the property for $1,000 a month so that will more than cover it, right?

She got a tenant. She did not pre-screen her properly. She got a bad tenant. A tenant from hell in fact. Her tenant only paid the first month’s rent and now does not return her phone calls. She optimistically said, “No problem – I’ll get her evicted”. Her tenant from hell is a professional tenant. He (the tenant from hell) accused Anna of being a slumlord. The eviction was delayed.

Two months of no income…then three months. Now Anna had to skip paying her credit card because she cannot even afford the minimum payments. Anna had to fire her eviction attorney because he couldn’t handle the eviction against the professional tenant.

Wan’t to know the rest of the story? Read the rest here: http://buyfirstdeal.ning.com/forum/topics/the-story-of-anna

Real estate investing lessons learned

Let me try to dissect Anna’s story and share lessons learned with regard to real estate investing.

1. Invest for the right reasons
After Anna won the auction, one of her immediate thoughts was “Now I am going to be rich”.  There really is  nothing wrong with wanting to get rich, who doesn’t! However, I can’t help but feel that money was her biggest motivating factor.

Besides, once you win your first auction, becoming rich is usually the last thing on one’s mind, at least that’s how I often felt when I won on my bids during auctions.

I usually had thoughts like “Oh no, I won… what did I get myself into?”, “Now you’ve got a lot of work ahead of you Jay…”, and “I did my due diligence right, so this deal should work!”. That’s why I can’t help but feel there’s something lacking here based on the story because her focus was on the money.

Just remember that if you are going into real estate investing just for the money, something is definitely missing! Personally, I always try to keep in mind that my decision to go into foreclosure investing is not really just about the money, it’s about financial freedom!

2. Don’t risk everything when investing!
Anna withdrew her life savings and used that as down payment. Don’t ever do this, it is not a good idea to risk it all for one deal!

You should at least have an emergency fund intact somewhere safe. I don’t believe in putting everything on the line like my entire life savings as I would rather set aside money for the specific purpose of investing and only use that.

I refer to this as my “Financial Freedom Account” or FFA which is just one of my “money jars” which I learned from T. Harv Eker and you can read more about it here: Manage your finances by becoming your own Chief Financial Officer.

Some of you may be thinking “But maybe Anna did not have enough money so she needed to use her life savings?”. Just a word of advice, if one cannot manage his/her money in order to set aside enough money to put down for a real estate investment, then one is not yet ready to start investing.

There should really be no need to use one’s entire life savings if one is able to manage their finances well. I believe that financial literacy is a prerequisite to real estate investing.

3. Always do your home inspections as part of due diligence
Anna bought the property because the outside looks good and she figured the inside should be in good condition also. Argh! Never buy a property without first doing a thorough inspection and getting estimates from reliable contractors.

I made this mistake once, but I was lucky that property’s  after repair value (ARV) was more than enough to cover the actual repair cost that I underestimated by Php100,000.

In Anna’s case, had she done her inspections well, she could have discovered the termite damage and avoided buying the property since she could not afford the termite damage repair.

Actually it would be okay to buy properties that have similar problems as long as they are discovered before purchasing the property, the costs are considered and justified after analysis, and the additional cost is reasonable and affordable.

With regard to the very limited time to inspect properties being sold in foreclosure auctions, this is very true, even here in the Philippines. This is the reason why I would rather buy bank foreclosed properties or bank acquired assets, which are also often referred to as ROPOA or ROPA.

In contrast, properties being sold in foreclosure auctions are those that have just gone through foreclosure proceedings, they are often for sale on cash basis only, it is hard to inspect these properties as they are often still occupied, and they still have a 1-year redemption period, just like tax foreclosures.

My point here is, foreclosure auctions are different from bank foreclosed property auctions, although in general, both are often referred to as “foreclosures”.

4. Always Pre-qualify tenants
Anna did not screen her tenants well. Without pre-qualifying tenants, one is inviting trouble. By Pre-qualifying tenants, you basically want to ensure that your tenants not only have the capacity to pay but are also good payers. A simple interview or a questionnaire and some background checks would have helped her avoid that tenant from hell.

Anna’s problems snowballed into something she could no longer handle but the sad thing about it is all of these could have been avoided had she done her homework. This is really one story which outlines how one should NOT invest in foreclosures and all real estate investors should learn from it as it contains perfect examples of what NOT to do.

Did I miss anything? Any reactions? Please share your comments below. Thanks!

—–

To our financial freedom!

Jay Castillo
Real Estate Investor
Real Estate Broker License #: 20056
Blog: http://www.foreclosurephilippines.com

Text by Jay Castillo. Copyright © 2009 All rights reserved.

P.S. – If you are a new visitor, please start here to learn more about foreclosure investing in the Philippines.

P.P.S – If you feel that anyone else you know might benefit from this post, please do share this to them and don’t forget to subscribe to e-mail alerts and get notified of new listings of bank foreclosed properties, public auction schedules, and real estate investing tips. If your inbox is getting full, you may subscribe instead to my RSS Feed.

How NOT to invest in foreclosures is a post from: Foreclosure Investing Philippines

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This is the third part of a series on Managing Finances. If you have not read the first 2 parts, head on over to Part 1 and Part 2!

In part 2 of my series of posts on managing finances, I mentioned that I would be discussing more about how I tracked my expenses and the tools I used to do these. For now, I’ll just focus on how I track my expenses. This is not rocket science.  I only need to record exactly where my money is going, particularly my cash on hand. Based on experience, this is where my money gets “lost”.

How many times have you wondered where your money went when it was still more than a week to go before payday?! Have you ever tried but failed to remember exactly where you spent your money? Get my point?!

Other expenses that are paid through a credit card, online banking, and through checks are easier to track because these transactions are automatically recorded and these are all written on the statement that arrives every month. However, I still do my best to record all of these daily simply because I want to make sure that the monthly statements I get are accurate.

My first tool – a pocket notebook
Believe it or not, I started tracking my expenses with a small notebook which I had in my pocket wherever I went. No, it was not a small laptop but a real notebook where I wrote down my expenses everyday. I then transferred the data to an excel sheet later in the day. I used to do this everyday but things went out of hand, literally, when I misplaced the small notebook. You can imagine the anguish I felt when I lost my notebook and I still have not transferred a couple of weeks’ worth of data to excel. This is the reason why I gave up using a small notebook to track my expenses.

Pocket Excel to the rescue
After I misplaced my pocket notebook, I decided to enter data directly to an excel sheet instead. Based on the the first entry on the excel sheet that I created for this purpose, I started doing this last August 22, 2007 and I have been doing this up to present day. You would think that this was very tedious because this meant that I had to be in front a computer everyday to do this right? Wrong! I didn’t have to. It just so happened that my sister had lent me her O2 XDA IIs when I accidentally crushed my Nokia 6280 in a moment of stupidity when I sat on it. Lo and behold, I now had a phone that had pocket excel. I copied the excel file from my desktop to my PDA. I have attached a printscreen of the excel sheet below. Ayos ba?! (Isn’t it nice?!)

Since I carry my PDA phone anywhere with me, I can input my expenses whenever I get the chance to do so. I can record money that goes into my pocket (the credits) and out of my pocket (the debits). As you can see on the printscreen above, the excel sheet I created simply includes the date, payee or payor, credit, and debit, and remarks (not visible on the printscreen).

Sometimes I would have to enter rough estimates of expenses if I forgot the exact amounts. I can later double check the amounts from all the receipts that I keep. By the way, I do throw away all those receipts once I transfer the data from pocket excel into MS Money. I see no point in keeping receipts, unless of course I would need them either for reimbursement purposes at the office, or for warranty. I’ll discuss more about MS Money in future posts about managing finances. By the way, I’m quite sure most new phones nowadays would have something similar to pocket excel and some like the iPhone would even have iPhone apps very similar to MS Money.

Why bother to track expenses?
It is quite obvious that it takes a lot of effort for me to track my expenses (though nowadays it takes just about 10 minutes a day). Why do I bother doing something which some would consider to be tedious and time-consuming? I do it simply because I want to show to the Universe that I am really managing my money and I intend to “win the money game” – a term I often hear when I listen to T Harv Eker.

I don’t track my expenses just to know where my money is going, I do it to ensure that the right percentages go to my “money jars” as discussed in my previous post. Before I even decided to track my expenses, I had already decided how much of my money was to go to my FFA, LTSS, Play, Tithe, Education, and Expenses accounts. Without this, tracking my expenses would be nothing but a waste of time. I also believe in the saying that “You cannot manage what you cannot measure”. When I see myself approaching the maximum amount for Expenses for example, I can adjust accordingly by stopping myself from spending more. By tracking my expenses, I help ensure that I am managing my money in such a way that I will definitely win the money game, get out of the rat-race, and become financially free!

It’s your turn
Still think you have no money to invest in foreclosed real estate? If I haven’t made it clear enough, you are supposed to build your FFA account and use it to finance your first real estate deal. The following is a summary of the steps you need to take:

1. Commit that you want to manage your finances and act based on your decision. If you don’t act, you’re just dreaming.
2. Decide the percentages you are to put in your money jars. I forgot to mention that these are flexible. It really is up to you.
3. Start tracking your expenses and manage your money. Do you think you’ve got what it takes to handle the first 30 days?!
4. Build your FFA until it can already finance your first real estate deal!

Conclusion
This post got delayed because I was pressuring myself to come up with a final post on managing finances that contained everything I wanted to say about the subject with the thought that once part 3 was published,  it’s over and done with. However, I realized that this would not be right. Managing one’s finances is so big so I really can’t just condense all of it in just 3 posts. This simply means that this is not the end of it and I will continue to write about managing one’s finances as I have barely scratched the surface. Topics that come to mind: How I got out of credit card debt, How to finance your first real estate deal, managing personal finances resources in the Philippines, etc…

Please share your thoughts on this as I also appreciate all of your inputs! Thanks!

If you have not yet read the first 2 parts of this series, head on over to Part 1 and Part 2!

—–

To our financial freedom!

Jay Castillo
Real Estate Investor
Real Estate Broker License #: 20056
Blog: http://www.foreclosurephilippines.com
Social Network: http://foreclosurephilippines.ning.com
Mobile: +639178843882
E-mail: ph.investor@gmail.com

Text by Jay Castillo. Copyright © 2009 All rights reserved.
P.S. – If you are a new visitor, please start here to learn more about foreclosure investing in the Philippines.

How I track my expenses and manage my money is a post from: Foreclosure Investing Philippines

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This is Part 2 of a series on Managing Finances. If you have not read the first part, head on over to Part 1. You can also go to Part 3 later!

In part 1 of this series about managing finances to get ready for real estate investing, I mentioned that the learnings that I got from the “How To Become Truly Rich” seminar of Bo Sanchez  and the “Money Jars” that were mentioned in T. Harv Eker’s Millionaire Mind Intensive program broke the camel’s back as that was the turning point in my quest to manage my finances.

They were the one-two punch that gave me the proper mindset and had me sit down and seriously consider taking control of my finances much like how a chief financial officer (CFO) manages a company’s finances.

What results did I get?

As promised, I am posting the results that I got when I first started managing my finances. I am actually quoting an old post of mine in one of my old blogs where I wrote about this last October 2008.

Living Paycheck-to-paycheck? Be your own CFO!

Posted by Jay Castillo | 10/19/2008 04:39:00 AM

I’ve said to myself before that I would be a lot better with my finances if I would only treat my personal income the way a CFO would manage the finances of the company he/she works for. Imagine if you tracked your income and expenses and know at any given time your net cashflow for the month. Personally it was really hard at the start but with the right tools and mindset, I was able to do it.

Anyway, to get you started, why not try reading Flexo’s explanation on how he’s become the Chief Financial Officer of his own life.

More than a year ago, this inspired me to start using MS Money to track and manage my own finances. It only took me a month to go from living paycheck-to-paycheck to having a positive monthly cashflow. After a year, i can confidently say that I have managed to save at least 25% of my total income, which are now in various investments. The breakdown of where my income went to is summarized below.

Managing my finances - results for August 2007 to July 2008

I’ll make another more detailed post about this in the future.

Tell me if you found this as helpful as I did!

I never was able to make a follow-up post about this on my old blog, which is okay because I get to make it here and I can more effectively relate it to foreclosed real estate investing. I’m sure most of you will also notice that the post above is incomplete as I didn’t even bother to define what FFA, LTSS, etc. are. Actually, these represent the “Money Jars” which I mentioned in part 1 of this series. For everybody’s reference, the account names are as follows :

• FFA - This is my Financial Freedom Account. I have a separate bank account where I put the money I have set aside for buying assets that will help me attain financial freedom. Passive income-generating real estate is one example of such asset. Other examples would include stocks, bonds, and mutual funds, provided they give dividends that are a form of passive income. For the period stated above, I was able to save enough funds into my FFA account that enabled me to invest in real estate and mutual funds. As you can see, I was able to exceed my target of saving at least 15% of my income and was actually able to save 25.72%. Imagine, I was living paycheck to paycheck then all of a sudden I was saving more than 25% of my income for investing! By the way, this only meant that I was able to consistently save at least 25% but I did not actually use up my entire FFA account for investing as a significant portion of this amount remained in my bank account during that time as I was still looking for good real estate deals.
• LTSS - This is my Long-Term Savings For Spending Account. This represents my savings account where I save for big-ticket items that we need to spend on like home appliances, a new house or home improvements, car repair, etc. I was also able to exceed my target of 10%. This is good or bad, depending on how you would look at it. It was good in the sense that I was able to save more than 10% of my income for this as my actual savings for my LTSS amounted to 17.87%. On the other hand, this may be bad because the 17.87% meant I actually SPENT 17.87% of my total income for things that are not really putting money in my pocket and can be classified as doodads. The big-ticket items where we spent a lot money on were major car repair expenses for my wife’s 10 year old Honda Civic, my insurance, and home repairs. Still, I believe this was good over-all because even though we had to spend on these, my FFA was not affected.
• Play account – This represents my savings for fun and recreational activities. According to T. Harv Eker, we should completely spend this account every thirty days with the goal of having fun. This actually helped a lot to get buy-in from my wife as she loved the idea. This was the missing ingredient from other savings plans because in my opinion, without the play account, one tends to get feelings of being deprived, frustrated, and “strangled”. From a target of 10%, we only spent less than 1% for this. We really need to spend more time having fun and we are already correcting this.
• Education – This represents the money jar where I am supposed to save 10% of my total income for spending on my own personal education for self improvement,or for “sharpening the saw”, so to speak. From an original target of saving 10% of my income for education, I only spent  1.43% on seminars for the 2007 broker’s licensure exam, and seminars on real estate investing and financial literacy. Again, this is one area of improvement and is a work in progress as I really should invest more on my education.
• Tithe – This represents our account for giving back and for charities. I know it may sound weird but I truly believe that by giving, we end up with more blessings coming into our lives. This does not mean that we give because we are expecting something in return. Giving with an open heart is the true essence of this practice. I made a conservative target of 5% and ended up with a measly 1.35%. This is a work in progress.
• Expenses – This is for living expenses like monthly amortizations for housing loans, car loans, insurance, utilities, food, gasoline, etc. From a target of spending only 50% of my total income for expenses, we ended up spending 52%, which is actually a miracle if you ask me.

So how the heck was I able to do all of these?!

The key was my ability to track my expenses. As they say, “You cannot manage what you cannot measure”. By diligently tracking my expenses, I was able to effectively manage my expenses, cashflow, and my “Money Jars”. I was able to easily identify expenses that were already costing us too much money and  I can decide immediately to stop spending more on them. Obviously, this would be very hard to do without tools like MS Money that helped me analyze my cashflow.

Find out how I tracked my expenses and the tools I used in part 3 of this series as I continue sharing how I was able to manage my finances and got started in real estate investing.

Proceed to Part 3 of this series or if you have not read the first part, head on over to Part 1.

—–

To our financial freedom!

Jay Castillo
Real Estate Investor
REBL#: 20056
Blog: http://www.foreclosurephilippines.com
Social Network: http://foreclosurephilippines.ning.com
Mobile: +639178843882
E-mail: ph.investor@gmail.com

Text by Jay Castillo. Copyright © 2009 All rights reserved.

Manage your finances by becoming your own Chief Financial Officer is a post from: Foreclosure Investing Philippines

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This is Part 1 of a series on Managing Finances. After reading, don’t forget to read Part 2 and Part 3!

One of the biggest stumbling blocks for beginning real estate investors is that you realize that you have little or no money to invest. The big question is “Where do I get the money for investment?” I believe that the starting point is to get it from your savings, which you get from managing your personal finances well.

When you always have savings available for investment, you can grab opportunities as they arise. Remember: great deals and opportunities may come anytime, and you don’t want to miss out on such opportunities because you simply don’t have enough cash on hand for downpayments, and/or have little chance of getting bank financing approved. Come to think of it, how can you expect to manage the cashflow from your properties (when you already have them) if you can’t even manage your own personal finances?

Before I managed my personal finances

When I was single, I never paid attention to my personal finances and I was even able to accumulate a significant amount of credit card debt. I also remember that I was living from paycheck to paycheck, with little or no savings at all. Fortunately, I was able to get out of that hole that I had dug for myself just before I got married.

After our wedding, my wife and I were able to continue with the savings plan that we devised that helped me get out of credit card debt and save enough money for our wedding, but that was short-lived. We ended up buying a house even if we really had no plans to buy one yet. Because of the monthly amortizations, we were again back to living from paycheck to paycheck.

After some time, when I first got interested in real estate investing, I suddenly realized that I really had no money to invest and our options were very limited because we already had an existing housing loan. We were stuck in the rat-race!

The book that started it all

Sometime in August 2005, my staff who also became a good friend of mine introduced me to the book Rich Dad Poor Dad by Robert Kiyosaki. As I have said in the past, this book started everything for me. I experienced a paradigm shift and started to question the financial decisions I had made in the past.

I started to learn the differences between assets and liabilities and I also began to “pay myself first”. I can still remember the arguments my wife and I had when I would bring up the subject that our house was not an asset but a liability.

Take note that my wife is a CPA-Lawyer and believed that such thinking was nonsense (thank God this is already a thing of the past as she has already read the book herself and understands). This was also the time I first got interested in real estate investing and realized that I really had no money to invest.

Sure, I started paying myself first but I still remember that at the end of each month, I often would need to get money from our savings just to ensure all our obligations are paid. The mind shift had already started but there wasn’t much progress in our bank account.

The “Latte factor”

During the latter part of 2005, I was able to read “Automatic Millionaire” by David Bach. What I remember most about this book was the “Latte Factor”, or those little luxuries and expenses that are unnecessary which, when added up, eat up a good chunk of your money.

I applied it in real life, managed to start saving a bit, but there was still not enough money for a real estate investment as it would take time to accumulate substantial savings for this. I also tried to look for ways to “automate” my savings but this mode was not yet in place for most banks during that time.

Other Robert Kiyosaki Books

For the most part of 2006, I continued reading other books from Robert Kiyosaki like the “Cashflow Quadrant”, “Rich Dad’s Guide to Investing”, and other similar books from other authors on the same subject matter. I was like a sponge and absorbed as much information as I can. They all reinforced the importance of financial literacy.

They helped a lot because during this time I experienced having a significant pay cut when I returned to a previous company I worked for. Inspite of the pay cut, I still managed to have a positive cashflow because of financial literacy. I was able to keep money earned through bonuses as they remained intact and unspent.

At that point, I already began looking at foreclosed properties but felt I was missing opportunities because my cash on hand was not enough and I also lacked information on the “how-to’s” of foreclosed property investing in the Philippines.

Feelings of frustration

After almost a year of reading books, except for increasing my savings mainly due to my being able to save my bonuses from work, I had little to show when it came to actual results with regards to foreclosure investing.

Feelings of frustration crept in and I was thinking that what I had learned from the books I have read are really hard to apply here in the Philippines.

On December 31, 2006 however, my prayers were answered when I saw the book “Think Rich Pinoy” by Larry Gamboa at National Bookstore. I bought it and immediately started reading it. This book again made a big impact on me and my frustrations were suddenly changed into a belief that the Rich Dad principles can really be applied in the Philippine setting as Larry was actually doing it! Now all I had to do was to save enough money for my first real estate deal.

What broke the camel’s back

I continued on my quest to learn more about personal finance and stumbled upon the “How To Become Truly Rich” Seminar by Bo Sanchez which I attended last July 21, 2007. This seminar really helped establish a solid foundation inside me when it came to managing my finances and it also helped correct myths about money which I erroneously believed in at that time.

From that point onwards, I believed that there was nothing wrong with striving to become rich if the ultimate purpose is to use it to help others. This somehow completed the pieces of the puzzle and suddenly I felt a heavy burden got lifted from me.

The money jars

At the same time, I was also listening to an audio recording of T. Harv Eker’s Millionaire Mind Intensive program. I also learned so much from listening to Harv Eker and one of the most remarkable things I learned was the concept of setting up “money jars” that would actually represent bank accounts for my financial freedom account, long term savings for spending account, education account, tithe, my “play” account, and expenses.

I would say that this was a big turning point in my quest to manage my finances as this broke the camel’s back, so to speak. Want to find out what results I got? I’ll discuss these in the next part of this series on how to manage finances so don’t miss it!

Head on over to Part 2 or Part 3 of this series.

—–

To our success and financial freedom!

Jay Castillo
Real Estate Investor
Real Estate Broker License #: 20056
Blog: http://www.foreclosurephilippines.com
Follow me in Twitter:http://twitter.com/jay_castillo
Find us in Facebook:Foreclosure Philippines facebook page

Text by Jay Castillo and Cherry Castillo. Copyright © 2009-2010 All rights reserved.

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Manage your finances to get ready for your first real estate deal! is a post from: Foreclosure Investing Philippines

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